Hong Kong Court of Final Appeal quashes conviction of TVB manager in high profile bribery case

The Court of Final Appeal has handed down an important judgment regarding bribery charges against former TVB general manager and TV presenter, Stephen Chan and his assistant, Tseng Pei-kun. In a case spanning seven years, Chan and Tseng were twice acquitted at first instance but found guilty of bribery by the Court of Appeal in November 2015. Tseng was found by the Court of Appeal to have offered, and Chan to have accepted, an unlawful advantage under section 9 of the Prevention of Bribery Ordinance (POBO), which governs bribery between private sector actors in Hong Kong.

In a detailed judgment dated 14 March 2017, the Court of Final Appeal unanimously reversed the Court of Appeal's decision, with the majority ruling that Chan was not acting “in relation to his principal (TVB)'s affairs or business" when accepting the advantage. As such, his conduct fell outside the purview of section 9 of the POBO. The judgment provides important clarification on the scope of Hong Kong's private sector bribery offence, in particular, what it means to act "in relation to a principal's affairs or business". With the Court of Final Appeal in January addressing the meaning of "acting for another" under section 9 of the POBO, the scope of the private sector offence has seen important clarifications in recent months.

Background

Chan was the general manager of the TV broadcaster, TVB. In tandem, he developed a celebrity status front-of-camera hosting a show, 'Be My Guest', televised by TVB, for which he received no additional payment. In exchange for HKD 112,000 from Tseng, Chan participated and performed in a side-show of ‘Be My Guest’ in the New Year's Eve Countdown Programme at Olympian City on 31 December 2009, which was produced and broadcast by TVB. TVB did not give express consent to this, but since they televised it, knew it was taking place. Being an employee and thus an agent of TVB, Chan was later charged with accepting from Tseng, without lawful authority or reasonable excuse, an advantage (HKD 112,000) as an inducement or reward or in relation to his principal (TVB)’s affairs or business, contrary to section 9 of the POBO. Tseng was charged with offering that amount to Chan as an inducement for Chan so to act in relation to the affairs or business of TVB. They were also charged with conspiracy under the POBO.

First instance: acquittal

Both were tried and acquitted by Judge Poon in September 2011 on three counts of bribery and two counts of conspiracy to defraud, on the basis that TVB had given Chan implied consent (he had performed such 'side-shows' before) and he therefore had reasonable excuse to accept the payment. After this acquittal, Hong Kong's Department of Justice (DOJ) appealed concerning the three bribery charges. The DOJ's appeal was allowed in November 2012, and the Court of Appeal remitted the case back to the District Court for a second trial. The same trial judge acquitted Chan and Tseng in March 2013, based on the reasoning of his first judgment.

Court of Appeal: guilty verdict

The DOJ appealed a second time on the three bribery charges. The DOJ's appeal was again based on the reasoning that Chan had no reasonable excuse to accept the payment from Olympian City for his appearance in 2009 without notifying TVB. The DOJ argued that despite the fact that TVB was aware of and actively participated in the production of the programme, it did not follow that TVB would have consented to Chan accepting the payment from Olympian City.

Chan's counsel argued that he had implied consent from TVB as he had accepted external engagements before without reporting them to TVB, which did not result in criminal prosecution. However, the Court of Appeal said this argument failed to distinguish between Chan's external engagements not connected with the business of his employer and those, like this, which were. His appearance at Olympian City was clearly connected with the business of TVB. This was governed by strict reporting policies which Chan failed to comply with.

The Court of Appeal ruled unanimously that the previous acquittals had no legal or factual basis and ordered the trial judge to convict Chan and Tseng. They were both later fined and consequently appealed to the Court of Final Appeal.

Court of Final Appeal: convictions quashed

The Court unanimously quashed the appellants' convictions. The Court first considered the mental fault element in relation to different variants of the section 9 offence, explaining that section 9 requires transactions which are "of such a nature as to savour implicitly of corruption" (Ribeiro PJ, para 58). It requires an act which implicitly at least suggests a deviation from an agent's normal duties. This should provide some comfort to agents, as the bare proof of a payment alone is not sufficient to discharge the Crown's burden on the Court's analysis. Something that undermines the integrity of the agency relationship is required.

The Court then considered the requirement in section 9 that the prosecution prove that the advantage was offered, solicited or accepted as an inducement or reward for, or otherwise on account of, the agent acting “in relation to his principal’s affairs or business”. This was the key element of the appeal. The Court applied and expanded the leading authority on this phrase (the 1997 Privy Council case of Commissioner of the ICAC v Ch'ng Poh). The majority of the Court held, in contrast to the Court of Appeal, that Chan’s appearance on the 'Be My Guest' segment of the Countdown show, was not an act “in relation to his principal’s affairs or business” as it was not intended to injure the bond of trust and loyalty between the principal and agent. There would need to be conduct adverse to the principal's interests, and on the facts, this was not the case. In fact, Chan's appearance rendered the New Year's Eve show more popular for TVB, the broadcaster.

Given the majority held that the acts fell outside section 9, there was no need to establish reasonable excuse. However, Tang PJ, who delivered a separate but concurring judgment, found that the section 9 offence was made out (ie Chan acted “in relation to his principal’s affairs or business”). In Tang PJ's view, "TVB was very much involved" (para 114). He approached section 9 in a manner similar to the Court of Appeal. However, Tang PJ found that Chan had reasonable excuse because he honestly believed that TVB would not object to his accepting the payment. Tang PJ added that it was the inescapable conclusion that Chan would be paid (para 137).

Finally, on conspiracy, the majority of the Court clarified the burden of proof in relation to a charge of conspiracy under section 9. The Court concluded that the prosecution must prove that the alleged conspirators agreed to a course of conduct that would involve the commission of the section 9 offence by at least one of them. This restores the orthodoxy and reinstates the standard on prosecutors that was left in doubt by the Court of Appeal.

In light of the above, this judgment provides a common-sense and commercial approach to section 9 and a move away from a near-strict liability interpretation advanced by the Court of Appeal. Pursuant to that judgment, a mere payment would prima facie suffice to establish liability, subject to the reasonable excuse defence.

If you wish to discuss, please contact Kyle Wombolt, Robert Hunt, or James Dalton of the Corporate Crime and Investigations team or your usual Herbert Smith Freehills contact.

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